WASHINGTON (Reuters) - Wall Street's billion-dollar bargain hunt for homes in depressed markets across the United States appears to have plateaued, potentially helping to cool the steep run-up in home prices and bring first-time buyers back into the market.

"Investors helped stabilize a housing market that was in free-fall and they did so by taking advantage of fire-sale home prices," said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. "Now you see few fewer bargain prices in the market and that's a reason investor demand is coming off its peak."

Investors accounted for about 20 percent of home purchases in June, down from a high of 23 percent in February and the lowest level since September 2012, according to the Campbell/Inside Mortgage Finance survey of real-estate conditions.

And they appear poised to reduce purchases further. A recent survey by polling firm ORC International found that about 48 percent of investors surveyed planned to curtail home purchases over the next year, up from 30 percent in a poll conducted 10 months earlier. Only 20 percent expect to buy more homes, down from 39 percent.

As the housing sector reached bottom, hedge funds and private equity firms began raising money to snap up foreclosed homes with the intent to rent them out for several years and unload them at a profit once prices rose far enough.

These firms have spent billions of dollars over the last year buying up single-family homes in bulk, mopping up excess inventory in the market and pushing up home prices.

Sellers often jumped at their all-cash offers, rather than taking a chance on first-time homebuyers who would have needed to secure a mortgage, still a hard task for all but the most qualified buyers. Many banks holding foreclosed properties are often looking for a quick deal.

But with mortgage rates rising in anticipation of the Federal Reserve scaling back the generous stimulus to the economy it introduced during the financial crisis of 2007-2009, investors are pulling back.

The softening of investor demand has also coincided with a drop in sales of so-called distressed properties, whether foreclosures or short sales. These homes usually sell for less than others and had been the focus of investor interest.

In July, distressed homes made up only 15 percent of sales, according to the National Association of Realtors. That matched June's reading, which was the lowest since the group started monitoring distressed sales in October 2008.

NO LONGER WINNING THE BIDS

Investment firms account for some of the biggest buyers in areas where house prices had fallen the most and have rebounded fastest - areas that by national norms still appear depressed.

Phoenix, Las Vegas, and parts of Florida are among the places where investors have focused. They are also areas that have seen some of the biggest price jumps this year, with prices in Phoenix up 23 percent in the first quarter from a year earlier, according to CoreLogic.

"Investors helped jump-start things for us and put the market back on course. They cleaned up and took a lot of housing product and made it useful again, instead of it being vacant, empty and unusable," said Harvey Blankfeld, a real estate agent with the Prudential Americana Group in Las Vegas, Nevada.

Blackstone Group, the largest investor in single-family homes to manage as rentals, has acquired thousands of properties in nine markets, from Miami to Phoenix. Similarly, Colony Capital, a Los Angeles-based investment firm, is among the private-equity firms that are buying U.S. homes in bulk.

Strong demand from those firms and others has cut inventory and made it hard for other buyers to find homes. But investors are no longer as likely to win bids as they were a year ago.

"Within an hour of posting a listing, I often get some of the same investment firms making an offer. It's not always going to be acceptable to my seller nowadays, but they seem to hope we'll agree to a lower price," Blankfeld said.

Now that there are fewer bargains, there are fewer incentives for investors to make bids.

RENTING OVER BUYING

While investor demand has leveled off, some analysts expect these firms will remain big players in the market.

The U.S. homeownership rate is at a 17-1/2 year low and rental demand is high, with vacancy rates near multi-year lows.

Indeed, the number of occupied rental apartments and townhomes in the United States has been rising since 2009 as millions of home owners were forced out of their properties by foreclosure. At the same time, stricter mortgage requirements have made it harder for would-be buyers to obtain loans.

"The total demand for shelter across in the country is increasing. At the same time, the percentage of owners versus renters is decreasing," said Oliver Chang, a former Morgan Stanley analyst who is the founder of Sylvan Road Capital LLC, an Atlanta-based asset management firm.

"Investors like ourselves whose long-term plan is to rent properties out and manage them on an ongoing basis see this as a macro trend that is supportive of our industry," he said.